Edited version of your written advice

Authorisation Number: 1051195450684

Date of Advice: 24 February 2017

Ruling

Subject: Work related expenses - travel - accommodation

Question 1

Are you entitled to a deduction for the cost of renting a property whilst travelling to Town B for work purposes?

Answer

Yes.

Question 2

Are you entitled to a deduction for the cost of meals whilst travelling to Town B for work purposes?

Answer

Yes.

This ruling applies for the following periods:

The year ending 30 June 2017.

The year ending 30 June 2018.

The year ending 30 June 2019.

The year ending 30 June 2020.

The scheme commences on:

10 October 2016.

Relevant facts and circumstances

You are employed as a director with a company (your employer).

Your employer has offices in several capital cities.

You reside in Town A with your family.

You commenced employment and your role with your employer in 2016.

Your employer requires that you travel to Town B for three days per week.

The days you spend in Town B may vary each week according to your workload.

Your employment contract specifies that you will be based in Town A as your primary work location.

Your employment contract provides that you may be required to travel on company business during the course of your employment.

A letter from your employer provides that you are employed in the Town A office and required to travel to Town B on a weekly basis.

You will be reimbursed by your employer for your flights up to a specified amount for an initial period of your employment.

Your employer does not reimburse your accommodation or meal expenses when you are in Town B.

You are required to cover the costs of accommodation and meals when in Town B.

When you are in Town B, you work from your employer's Town B office.

You have provided that you would like to rent an apartment as it would be cheaper on a long term basis rather than staying in hotels.

You are currently leasing an apartment in Town B for a specified amount in an arm's length arrangement.

The apartment is close to your office.

The apartment is fully furnished.

You will store some minor personal item at the apartment such as your bicycle.

The apartment may occasionally be used by your family if they wish to travel to Town B with you, however this is expected to be very infrequent as the travel you undertake is mainly mid-week.

You incur meal expenses.

You incur transport expenses to/from the airport.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 8-1

Income Tax Assessment Act 1997 Subdivision 900-B

Reasons for decision

Summary

You are entitled to a deduction for the rent paid on an apartment when the expense is not disproportionate to what you would have otherwise spent on suitable commercial accommodation.

You are entitled to a deduction for your meal expenses when you are travelling on work in Town B.

As you do not receive a travel allowance you cannot rely on the exception from substantiation provisions in Subdivision 900-B of the ITAA 1997. You must have the necessary written evidence to substantiate your deduction claims for accommodation, meals and incidentals. You will need to keep receipts/records in relation to your travel expenses.

Detailed reasoning

Accommodation expenses

Section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) allows a deduction for all outgoings to the extent to which they are incurred in gaining or producing assessable income, or are necessarily incurred in carrying on a business for that purpose. However, a deduction is not allowable for outgoings that are of a capital, private or domestic nature.

In considering the deductibility of travel related expenses a distinction is made between travel to work and travel on work. Where the duties of the job require a taxpayer to travel in the course of undertaking their work duties, the taxpayer's expenses can be deducted (Taylor v Provan 1975 AC 194).

The occasion of the outgoing may give the expenditure the essential character of an income producing expense. An example is where the expenditure is incurred while away from home overnight on a work related activity. Where a taxpayer is away from home overnight in connection with an income producing activity, accommodation expenses are generally deductible.

Taxation Ruling TR 1999/10 Income tax and fringe benefits tax: Members of Parliament - allowances, reimbursements, donations and gifts, benefits, deductions and recoupments provides some guidance on the deductibility of expenses on an additional property purchased or rented as accommodation for work related travel.

Paragraph 328I of TR 1999/10 provides that a deduction is allowable for expenses incurred in relation to financing, holding and maintaining an additional property purchased or rented if it is occupied by the taxpayer as accommodation in the course of travelling for work, except to the extent the expenses are of a capital, private or domestic nature.

In your case, you are required to travel between Town A and Town B in the course of undertaking your duties as a director. Travel is fundamental to your role. You have indicated that you would generally be travelling alone while your family remains in Town A. You will only be storing the necessary items for you to reside there. Therefore you are considered to be travelling on work and your travel related expenses including rented accommodation are deductable under section 8-1of the ITAA 1997, so long as the expense incurred in relation to rental accommodation is not disproportionate to what you would have otherwise spent on suitable commercial accommodation and you are not renting the property from a related party.

Meal expenses

As with the general rules regarding accommodation expenses, meal expenses are normally private or domestic in character. However, as you are considered to be travelling on work your travel expenses including meal expenses are deductable under section 8-1of the ITAA 1997.

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